Etsy PESTEL Analysis

Political

Political disruption in the United States or among countries abroad could promulgate local, national, and international regulations that either directly interferes with or indirectly undermines Etsy's business model (Luckman, 2016; Etsy, 2017b). As an example, recent changes to federal laws in the United States and throughout member nations of the European Union propagated new enforcement standards regarding how electronic payment processing, consumer privacy, and customer protection standards take place (Erickson & Meyer, 2016). Likewise, there is a growing amount of pressure concerning taxation, compensation, and labour laws related to freelance

Economic

A substantial portion of Etsy's business originates within the U.S. economy. Specifically, nearly 90% of Etsy's transactions are in USD, which is problematic when it comes to global expansion opportunities (Etsy, 2017a). The reason this constitutes an issue is that currency exchange rates related to the USD are unfavourable for quite a few countries, thus making purchasing activities on Etsy financially unappealing for consumers in these areas. Furthermore, deterioration in the economic conditions of the United States could lead to a reduction in discretionary spending among Etsy consumers based in the U.S., which could undermine the viability of Etsy's marketplace.

Socio-Cultural

According to McKinsey and Company, people want to work outside the 9-5 paradigm, and would strongly prefer to work for themselves in ways that are more personally and professionally rewarding (Etsy, 2017a). This trend constitutes a major opportunity for Etsy, as its user-friendly and extensive platform capabilities provide a vehicle for aspiring entrepreneurs to pursue a new style of livelihood (Zhang, 2014). Etsy is currently exploring programs to help aspiring and entrepreneurial craftsmen launch storefronts on Etsy to alleviate apprehension regarding the start-up of an e-business.

Technological

Cyberattacks qualify as a noteworthy technological force Etsy should consider. During a time where major corporations are spending exorbitant amounts of money on digital security and are still getting hacked, Etsy must approach cybersecurity issues with the utmost care. Issues stemming from cybersecurity include the theft of Etsy's proprietary business methods and intellectual property (Etsy, 2017a). Likewise, telecommunication shutdowns that prohibit communication internally at Etsy and externally among buyers and sellers could result in loss of faith regarding Etsy's ability to maintain a secure platform. Consequently, if these risks come to fruition, Etsy may lose subscribers to competing platforms or indirectly put its sellers out of business (Mancino, 2016). This outcome negatively impacts Etsy's bottom-line, but it also erodes the Etsy brand.

Environmental

Natural disasters where significant numbers of Etsy buyers and sellers operate are liable to propagate repercussions that negatively affect Etsy's gross sales. Likewise, natural disasters in areas where Etsy maintains infrastructure and equipment necessary for conducting business could cause damage to the company's property. As an example, when Hurricane Sandy swept through the eastern seaboard of New York, Etsy's headquarters in Brooklyn closed for five full days (Etsy, 2017a). During this time, requests for assistance from buyers and sellers amassed unaddressed for several days. Although Etsy requisitioned additional resources to handle the issue, had Etsy been unable to procure additional resources to support its sellers' needs quickly, sellers operating on thin margins might be unable to continue making products or may fail to fulfil their customers' orders.

Legal

Etsy's digital marketplace is operational in well over one hundred countries around the world. As such, the company must comply with numerous legal frameworks to remain a bona fide business entity in foreign nations. Should the legal frameworks of these countries become unstable, corrupt, or vulnerable, Etsy may need to withdraw its platform to protect its intellectual property rights from third parties who could harm its business (Etsy, 2017a). Etsy sellers may also attempt to sell products that violate copyright infringement and intellectual property laws, which could propagate ramifications for Etsy if it cannot demonstrate due diligence toward preventing and policing these types of activities (Hamari, Sjoklint, & Ukkonen, 2016).

Etsy. (2017b). Notice of 2017 annual meeting of stockholders and proxy statement. Available from https://investors.etsy.com/~/media/Files/E/Etsy-IR/annual-report-proxy-materials/etsy-proxy-statement-2017.pdf

Statista. (2017). Key demographics of Etsy sellers in the United States as of December 2016. Available from https://www.statista.com/statistics/447960/us-etsy-seller-demographics/

Zhang, S. (2014). Successful internet entrepreneurs don't have to be college dropouts: A model for nurturing college students to become successful internet entrepreneurs. International Journal of Information and Communication Technology Education, 10(4), pp. 53–69.